Geographic Diversification in Private Equity Markets

An Overview of Total Portfolio Management

Welcome to the final entry in our series on the Geographic Diversification in Private Equity Markets, Ben's latest global macroeconomic outlook developed and written in partnership with Oxford Economics. Earlier in our series, we discussed the current private market landscape and the global macroeconomic environment in order to demonstrate the potential opportunity that lay in private equity geographic diversification. In this article, we’re pulling back the curtain and spotlighting the proprietary support structure at the core of Ben’s approach to private markets.

By providing liquidity to alternative asset owners and managing loans collateralized by such assets, Ben always had a strong focus on developing multi-asset class inventory management capabilities. To fully harvest value from private markets we believe strategic asset allocation and active portfolio management are crucial. At Ben, we call this framework “Total Portfolio Management” (TPM), with capabilities extending across private fund strategies and markets (e.g., private equity, venture capital, private credit, real estate, natural resources, infrastructure, hedge funds etc.).

Ben’s portfolio management framework employs modern, quantitatively-driven portfolio construction, market forecasts and factor-based risk management techniques, enabling an unbiased portfolio management style rooted in data and rigorous research. Active management allows for dynamic response to market changes and the ability to offer high quality liquidity to otherwise illiquid alternative markets.

Figure 1: Illustration of Ben’s Total Portfolio Management which considers market forecasts, portfolio construction, and liquidity and rebalancing.

Our portfolio management framework is best understood through its three individual yet highly interconnected areas of focus:

1. Market Forecasts and Fund Valuations

Incorporating global economic forecasts, risk-premiums, and fund alpha into fair valuation of alternative assets is an essential part of a coherent framework. We believe that a strong integration between bottom-up research and quantitative modeling of fund dynamics creates a robust valuation process that accounts for market risk, liquidity and other drivers of fund performance such as sector and strategy focus.

2. Portfolio Construction Framework

Balancing risk/reward trade-offs within complex portfolios of alternatives requires a systematic and data-driven multi-asset portfolio allocation framework. When a private asset is added to a large portfolio, a diversified manager using modern risk management can extract many synergies, economies of scale and risk-adjusted benefits. A strong integration between portfolio optimization and fund valuations enables us to maintain balanced portfolios of illiquid assets.

3. Liquidity and Rebalancing

Accessible and transparent secondary liquidity is a crucial component of efficient markets, and necessary for investors to actively manage their rebalancing needs. Ben’s TPM framework is designed to unlock efficiencies that can be passed to clients in the form of competitively priced offers against illiquid alternative investments.

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Download the full Geographic Diversification in Private Equity Markets white paper above or contact us today to discuss what Ben’s secondary market liquidity solutions could mean for you.

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Conclusion

Ben used its portfolio management framework and private market risk/return forecasts to illustrate the potential diversification benefits to investors. In our most recent analysis, broad themes emerge from the private market allocation over the next five years, including a clear case for geographical diversification, showing that it can help to deliver higher risk-adjusted returns compared to a domestic-focused portfolio.

Trust Ben™

At Ben, we have crafted a suite of reliable, ongoing liquidity solutions for investors in alternative assets. Our process seeks to give investors access to hard-earned investment capital, with liquidity provided from our own balance sheet. Contact us today to schedule a consultation with our expert team.

The information in this material is not intended to replace any information or consultation provided by a financial advisor or other professional nor shall be perceived to constitute financial, legal, accounting or tax advice.

The views and opinions expressed are those of the panelists and do not necessarily reflect the official policy or position of Ben or Oxford Economics. The information in this material is not intended to replace any information or consultation provided by a financial advisor or other professional nor shall be perceived to constitute financial, legal, accounting or tax advice.

These materials contain certain estimates, projections and forward-looking statements that contain substantial risks and uncertainties. The estimates, projections and forward-looking statements contained herein may or may not be realized, accurate or complete, and differences between estimated results and those realized may be material. Such estimates, projections and forward-looking statements are illustrative only and reflect various assumptions of Ben’s management concerning the future performance of Ben and its affiliates, and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Ben’s control.

Except as otherwise noted, the materials speak as of January 2022. Neither Ben nor any of its affiliates or representatives undertakes any obligation to update or revise any of the information contained herein or to correct any inaccuracies which may become apparent.

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